Office of the Chief Economist National Credit Union Administration. Economic Overview. California State Examiner School.

Transcription

1 Office of the Chief Economist National Credit Union Administration California State Examiner School May 30, 2017

2 Credit Union Performance Trends Recent Data About Credit Union Performance in California, NCUA Region 5, and the Nation NCUA Region 5 is responsible for all federally insured credit unions in Alaska, Arizona, California, Guam, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington, except for credit unions with assets in excess of $10 billion. 2

3 Credit Union Performance: Q4 Version 6 Membership Growth Quarter over Same Quarter a Year Earlier, Percent California Region 5 US 3

4 Credit Union Performance: Q4 Version 10 Deposit Growth Quarter over Same Quarter a Year Earlier, Percent California Region 5 US 4

5 Credit Union Performance: Q4 Version Loan Growth Quarter over Same Quarter a Year Earlier, Percent California Region 5 US 5

6 Credit Union Performance: Q4 Version Delinquency Rate In Quarter Shown, Percent California Region 5 US 6

7 Credit Union Performance: Q4 Version 1.2 ROA, Year to Date In Quarter Shown, Percent California Region 5 US 7

8 Key General Economy Trends Review the Recent Data About Jobs and Consumers 8

9 Job Growth Still Strong; Unemployment Rate At 10-Year Low Quarterly Average of Monthly Payroll Job Gains and Unemployment Rate thousands of jobs Change in nonfarm payrolls: Blue Bars (left axis) Unemployment Rate: Red Line (right axis) unemployment rate, percent 13 April 2017: 211K 12 April 2017: 4.4% Source: Bureau of Labor Statistics

10 Standard & Broad Rates Both Trending Down Unemployment Rates: Standard and Broad percent Broad -- Unemployed, Underemployed & Discouraged Workers (U6) Source: Bureau of Labor Statistics Standard -- Unemployed Apr-17: 4.4% Apr-17: 8.6%

11 Broadest Measure of Labor Market Slack Coming Down but Still Slightly Elevated Unemployment Rates: Broad less Standard percentage points 4 3 April: 4.2 percentage points 2 Broad--Unemployed, Underemployed & Discouraged Workers (U6) less Standard (U3) 1 Source: Bureau of Labor Statistics

12 California and U.S. Unemployment Rates U.S. and State Unemployment Rate in Q4 percent California unemployment rate, % US Unemployment rate

13 Unemployment Rate and Credit Union Loan Growth Aggregate Credit Union Loan Growth & U.S. Unemployment Rate percent CU Loan Growth (Q4/Q4) -- Blue Bars Unemployment Rate in Q4 -- Red Line

14 Unemployment Rate and Credit Union Loan Growth State Unemployment Rate in Q4 and CU Loan Growth (Q4/Q4) percent California CU loan growth, % (right axis) California unemployment rate, % (left axis)

15 Unemployment Rate and Credit Union Loan Delinquency Rate Aggregate Credit Union Delinquencies, Percent of Loans & U.S. Unemployment Rate in Q4, Percent CU Delinquency Rate -- Blue Bars (Right Axis) Unemployment Rate -- Red Line (Left Axis)

16 Unemployment Rate and Credit Union Loan Delinquency Rate State Unemployment Rate in Q4 and CU Loan Delinquency Rate (Q4) percent California CU delinquency rate, % (right axis) California unemployment rate, % (left axis)

17 Where Are Unemployment Rates High? CA: 4.8% 17

18 Where is Labor Market Risk Rising? CA: -70 Basis Points 18

19 Consumer Sector Indicators OK Consumer Financial Obligations Ratio percent of after-tax income Financial obligations as a share of disposable income have dropped sharply; remain relatively low Includes debt and rent/lease payments Low interest rates help Consumer confidence was roughly flat during ; jumped after election. Highest levels in a decade, well above recession lows. Still not back to pre-recession levels Summary Consumer Confidence Index Confidence Index, Jan 2000 = 100 Sources: Conference Board Reuters/University of Michigan Apr

20 Credit Union Loan Portfolio: Autos and Homes Credit Union Lending by Loan Type Billions of $, Q4 2016Q4 Total Loans: $869 Billion Other (10%) Autos (34%) Credit Cards (6%) Real Estate (50%) 20

21 National New Motor Vehicle Sales Are Slowing New Motor Vehicle Sales quarterly average of seasonally adjusted annual rates Average : 16.8M Apr. 2017: 16.9M Source: AutoData

22 Credit Union Performance: Q4 Version 30 Auto Loan Growth Quarter over Same Quarter a Year Earlier, Percent California Region 5 US 22

23 Credit Union Performance: Q4 Version Data not available before 2013 Auto Loan Delinquency Rate In Quarter Shown, Percent California Region 5 US 23

24 Home Sales Heading Higher 9,000 8,000 Home Sales by Quarter thousands, seasonally adjusted annual rate Tax Credits Expire Q1 2017: 6.2M 7,000 6,000 5,000 4,000 3, Sources: National Association of Realtors, Census Bureau 24

25 Home Sales Heading Higher? Four Quarter Growth in Home Sales: 2017Q1 percent US 5.7 West 8.2 South 6.2 Share of U.S. Total Most Recent Four Quarters Northeast Midwest West 23% South 42% Northeast 12% Midwest 23% Source: Census Bureau, NAR

26 Home Prices Continue to Rise Seattle, WA Portland, OR Dallas, TX Denver, CO Boston, MA Tampa, FL Miami, FL San Diego, CA San Francisco, CA Las Vegas, NV Chicago, IL Detroit, MI Charlotte, NC Minneapolis, MN United States Atlanta, GA Phoenix, AZ Los Angeles, CA Cleveland, OH Washington, DC New York, NY Percent Change in Case-Shiller Home Price Indexes 12 months ending February

27 Home Prices Continue to Rise California House price index US House price index U.S. and State House Price Indexes in Q4 Index Source: FHFA. Purchase only Price Index (1991Q1 = 100) 27

28 Credit Union Performance: Q4 Version 12 Real Estate Loan Growth Quarter over Same Quarter a Year Earlier, Percent California Region 5 US 28

29 Credit Union Performance: Q4 Version Fixed Rate Real Estate Loan Delinquency Rate In Quarter Shown, Percent California Region 5 US 29

30 Credit Union Performance: Q4 Version Member Business Loans as a Share of All Loans , percent U.S. MBL share in 2016Q4: 7.2% (bars) CA MBL share in 2016Q4: 9.0% (line)

31 Valuations Generally Rising with Multifamily Leading Other Sectors Index Value (2000 Dec = 100) U.S. Primary Property Type Quarterly Indices - Equal Weighted, Data through March of 2017 U.S. Office U.S. Industrial U.S. Retail U.S. Multifamily Source: CoStar CCRSI Release, April

32 Valuations Generally Rising in the West U.S. West Property Type Quarterly Indices - Equal Weighted Data through March of West Office West Industrial West Retail West Multifamily Index Value (2000 Dec = 100) Source: CoStar CCRSI Release, April

33 Credit Union Performance: Q4 Version Member Business Loan Delinquency Rate , percent U.S. MBL DQ rate in 2016Q4: 158 basis points CA MBL DQ rate in 2016Q4: 32 basis points

34 Monetary Policy Indicators Jobs, Inflation, and Interest Rates 34

35 Inflation Heading Higher? 3.5 Two Views of Core Inflation 12-month inflation rate, percent Fed Inflation Target Core CPI Core PCE -- Fed Sources: Bureau of Labor Statistics, Bureau of Economic Analysis Preferred

36 Fed Dot Chart: Interest Rates Headed Higher? Midpoint of Target Range of Federal Funds Rate at end of year, % Federal Reserve Board Members and Bank Presidents, March 2017 Bars - Median of midpoints of target range Blue Dots - Range of midpoints of target range Small Red Dots - December 2016 median of midpoints Longer Run Source: Federal Reserve Actual target rate (Midpoint of range) 36

37 Credit Union Deposit Rates 8 7 Credit Union Deposit Rates and Three Month Treasury Bill Rate, Q4 percent Share drafts Regular shares Money market funds Share certificates 3 month bill

38 Fed Dot Chart: Interest Rates Headed Higher? Median of Appropriate Fed Funds Target for 2017Q4 Forecasts from September 2014 through March Source: Federal Reserve Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 38

39 Private Forecaster Outlook: Term Spread Interest Rate Forecasts from May WSJ Survey average of forecasts, percent 0.9 Federal Funds Rate year Treasury Rate Apr (actual) June 2017 Dec 2017 June 2018 Dec 2018 June 2019 Dec

40 Private Forecaster Outlook: Term Spread Implied Term Spread Forecast: May WSJ Survey percentage points year Treasury note less federal funds rate Apr (actual) June 2017 Dec 2017 June 2018 Dec 2018 June 2019 Dec

41 Yield Curve is Flattening; Longer End of Short Maturity is Heading Higher Treasury Yield Curves percent Dec 2013 average (Most recent long term rate highs) June 2014 avg Dec 2015 avg average April 2016 average 3m Years 41

42 Consensus Forecast Consensus forecast for the next year or so is not very exciting. Economy grows 2-2.5% at annual rate (long-term history is more than 3%, but some slowdown from demographics was likely anyway). Unemployment steadies at just over 4.5% -- full employment. Consumer price inflation averages around 2% (oil prices remain a wildcard). Interest rates move slowly higher Federal Reserve/private forecaster path. Sectoral/regional developments may influence credit unions more than national trends. 42

43 Risk Scenarios Two Scenarios with Significant Probabilities. A. U.S. Downturn: Foreign Growth Slowdown No Replay of Great Recession, tight fiscal policy, trade war National unemployment rate rises to 7% or so (not 10%) Inflation stays down House prices edge down or are flat. Interest rates stay low. Fed may reduce funds rate. B. U.S. Economy Picks Up More than Expected: Tax cuts, infrastructure spending, foreign growth recovery Unemployment declines more sharply than in the consensus. Inflation moves higher along with oil prices. House prices continue to rise. Fed raises funds rate 3 or 4 times. Long rates rise, but not by as much as short. 43

44 Exposure to Export Outlook: Export-Supported Jobs by State Merchandise Exports, 2016 Total Exports to China $billions $billions % of total exports Alaska Arizona California Hawaii Idaho Nevada Oregon Utah Washington Region V United States 1,

45 Contact Us 45

46 Background Recent National Credit Union Indicators 46

47 Credit Union Performance Indicators Credit Union ROAA in Q4, in Basis points Source: NCUA Call Reports 47

48 Credit Union Performance Indicators Loan to Share Ratio in Q4, , Percent Source: NCUA Call Reports 48

49 Credit Union Performance Indicators Four-quarter CU Loan Growth Ending in Q4, Percent Source: NCUA Call Reports 49

50 Credit Union Performance Indicators Credit Union Loan Delinquency Rate in Q4 percent Source: NCUA Call Reports 50

51 Credit Union Performance Indicators 3.20 Credit Union Net Interest Margin in Q4, YTD, percent of average assets Source: NCUA Call Reports 51

52 Credit Union Performance Indicators 12.0 Credit Union Net Worth Ratio in Q4, percent Source: NCUA Call Reports 52

53 Credit Union Performance Indicators Credit Union Net Long-Term Asset Share in Q4, percent Source: NCUA Call Reports